The difference between the guaranteed profit and actual share of profit is borne by ________.
The difference between the guaranteed profit and actual share of profit is borne by ________.
The correct option is D The partner who gave guarantee
Guarantee of profit in Partnership Accounts
Sometimes, a partner is admitted in the firm on guarantee in respect of his minimum share of profit from the business. Such a gurantee can be given even to an existing partner also. Such a guarantee to the incoming partner is given either by
- the firm i.e. by all the old partners in an agreed ratio, or
- some of the old partners or any one of the old partners
When all the partners guarantee that one of the partners shall be given a minimum amount of profit, we should calculate the following two amounts separately:
- Share of profit of the guaranted partner as per profit sharing ratio, and
- Minimum guaranteed amount of profit of the guanteed partner.
The higher of the above two is to be given to that partner. The balance of profit (total profit minus profit given to the guaranteed partner) is to be shared by the remaining partners in their respective profit -sharing ratio.
When the new partner’s share of profit is more than the guaranteed amount, his actual share of profit is given to him instead of the guaranteed amount of profit and difference of guaranteed profit and actual share of profit is borne by the partner who is giving guarantee.
Guarantee of profit in Partnership Accounts
Sometimes, a partner is admitted in the firm on guarantee in respect of his minimum share of profit from the business. Such a gurantee can be given even to an existing partner also. Such a guarantee to the incoming partner is given either by
- the firm i.e. by all the old partners in an agreed ratio, or
- some of the old partners or any one of the old partners
When all the partners guarantee that one of the partners shall be given a minimum amount of profit, we should calculate the following two amounts separately:
- Share of profit of the guaranted partner as per profit sharing ratio, and
- Minimum guaranteed amount of profit of the guanteed partner.
The higher of the above two is to be given to that partner. The balance of profit (total profit minus profit given to the guaranteed partner) is to be shared by the remaining partners in their respective profit -sharing ratio.
When the new partner’s share of profit is more than the guaranteed amount, his actual share of profit is given to him instead of the guaranteed amount of profit and difference of guaranteed profit and actual share of profit is borne by the partner who is giving guarantee.
